European foreign ministers agreed to remove EU sanctions on Myanmar on Monday, prompting criticism from rights groups as further evidence emerged of recent grave abuses against minority Muslim Rohingyas.

The EU’s most senior foreign affairs official, Catherine Ashton, said the decision to resume all trade except arms would help the democratic transition in Myanmar.

“The people want democracy, peace and prosperity. They deserve it. Their journey has begun and we want to be part of it,” she said in a statement.

The opposition party led by Aung San Suu Kyi, which for years had urged the international community to punish the former military regime, joined the government in welcoming the EU’s decision.

“Whether the lifting of EU sanctions came about at the right time or not, what’s important is to take advantage of this development for our country,” said Nyan Win, a lawyer and spokesman for the main opposition National League for Democracy.

But the announcement was not universally welcomed.

Burma Campaign UK said that Myanmar had failed to release all political prisoners, end ethnic conflicts and improve the situation of minority Muslim Rohingyas in western Rakhine state; all preconditions which the EU set for removing sanctions indefinitely when it suspended them a year ago.

“EU member states are ditching measures that have motivated the current progress and gambling on the good will of Burma’s government and military to keep their word to keep reforms on track,” said Lotte Leicht, HRW’s EU director.

On Monday, the New York-based rights group released a damning report of the ethnic cleansing of Rohingyas amid what it called “the most sustained and systematic” rights abuses in Myanmar since the start of the current reform process.

The report identifies four mass, unmarked graves in Rakhine state containing the bodies of dozens of Rohingyas killed during bloody sectarian riots in June and October last year. More than 200 people were reportedly killed in the clashes.

A government spokesman denied HRW’s findings. A commission of inquiry into the riots backed by the quasi-civilian government presented its own report to President Thein Sein on Monday and is due to make its findings public this week.

A video obtained by international media agencies and released on Monday showing police inaction in the face of Buddhist attacks against Muslims in the central Myanmar town of Meikhtila last month has piled yet more pressure on the government.

The footage – much of it taken by Myanmar police – appears to show a local Buddhist man urging people not to pour water on a badly burned Muslim lying in the street: “No water for him. Let him die,” he says.

In other scenes, policemen do nothing as Buddhist mobs including monks attack Muslims, destroy their properties and loot a mosque.

“The Burmese government has yet to earn the trust of many people, especially those in simmering conflict zones and ethnic areas. For them, rights protections and reform are promises unkept,” says HRW’s Leicht.

Although the government has signed ceasefires with many of Myanmar’s ethnic insurgent groups, sporadic skirmishes between the army and Kachin rebels in northern Myanmar have escalated during the ongoing political and economic reform process.

Khon Ja of the Kachin Peace Network says that this is another reason why the EU’s removal of sanctions was premature.

“The end of sanctions may be good for the economy,” she said. “But this decision by the EU is still questionable as political prisoners remain in jails and other human rights violations continue in Kachin and other parts of the country.”